The Odds Favor the Bulls

Chances are good that the Dow Jones Industrial Average will finish the year above 15,000—and the odds are 50-50 it could approach 18,000 by the end of 2014.

Did the Dow Jones Industrial Average really hit new highs last week? Practitioners of the dismal science might answer: Not so fast. When the value of an asset rises more slowly than the rate of inflation, then in economic parlance, real gains should be distinguished from nominal. In real terms, a Dow of more than 15,651.80 would have been required for the average to exceed its October 2007 peak.

Inflation was one reason Barron's called its own forecast "conservative" when it put the odds last February at seven...